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China Sets May 1st Deadline to Replace Business Tax with Value Added Tax

China Sets May 1st Deadline to Replace Business Tax with Value Added Tax

The Chinese government has announced that Value Added Tax (VAT) reforms will be fully implemented and expanded to the industries of construction, real estate, finance and consumer services starting May 1st, 2016.

China first launched the business tax-to-VAT pilot program in Shanghai in 2012 and began extending it gradually. After the successful trials, the Central Government announced last month that it has decided to expand the operation of the pilot project nationwide, covering all industries.

The replacement of the business tax for VAT will lower tax burdens on all industries, streamline tax processes and should encourage further investment in the country. The impact of this measure will significantly affect business operations in China, particularly regarding contractual reviews, price negotiations and VAT compliance solutions. Organizations operating in the region should be prepared to undertake ERP system upgrades, review VAT processes and conduct VAT trainings for their end users in the near future.

What’s Next?

Based on our previous experience in VAT and withholding tax implementations, our Asia Pacific consulting team has developed an effective conversion plan/package which can help organizations adapt to the new VAT system within 4-8 weeks. Contact us today to discuss the sector-specific changes and solutions in more depth.

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